RPSM11102060 - Technical Pages: Lifetime allowance: When you test for the lifetime allowance: Phased retirement
Phased retirement and fund designation
| [s165(3)][s216(1)][Sch 28] |
Where a member draws their entitlements under an arrangement in stages, whether through fund designation in a money purchase arrangement or through staggering a scheme pension or other benefit entitlement, each tranche of benefit provision drawn is a separate BCE. So only the entitlement arising is caught.
Example
Trevor has a fund valued at £200,000 held under a money purchase arrangement. On 20 November 2006, aged 58, he decides to draw benefits from half his fund (£100,000). He draws £25,000 as a pension commencement lump sum, and chooses (designates) to use the remaining £75,000 to generate an unsecured pension through income withdrawal.
A lifetime allowance test is triggered on 20 November 2006 through two BCEs (the payment of the lump sum (BCE 6) and the designation of funds to provide an unsecured pension (BCE 1). The amount crystallising at these two BCEs are £75,000 (through BCE 1) and £25,000 (through BCE 6) - £100,000 in total.
Five years later, aged 63, Trevor decides to take benefits from the remaining uncrystallised funds held in the arrangement. These funds are now worth £110,000. Trevor again draws the maximum pension commencement lump sum of £27,500 and uses the remaining £82,500 to generate a drawdown pension through income withdrawal (additional fund designation).
A second lifetime allowance test is triggered at that point as there have been two new BCEs. The amount crystallising at the two BCEs is BCE 1: £82,500 and BCE 6: £27,500 - £110,000 in total.
| Glossary (RPSM20000000) |
